South Africa’s government has retained special voting rights in South African Airways (SAA) even after selling a majority stake, and will be given R3 billion in preference shares that can be redeemed through future cash flow.
This means the state stands to benefit should new owner, the Takatso Consortium, revive a carrier that’s struggled under years of heavy losses, corruption and mismanagement, according to a statement from the Department of Public Enterprises on Thursday.
Takatso – made up of a local jet-leasing company and private-equity firm – will provide R3 billion in working capital and has valued SAA’s assets at about the same amount, the department said.
The group agreed to take control of the airline almost a year ago for a notional sum of about R51, in return for spending commitments and responsibility for operations.
“The R51 was a nominal sum set some time ago when SAA was not at all a going concern,” Public Enterprises Minister Pravin Gordhan said by phone. “While now it is still in the recovery phase, things are far better for government than it was when that price was set.”
The details emerged after the National Treasury criticised the terms of the deal, saying SAA represents a “contingent liability” as the government may be liable for certain costs.
The state will still be on the hook for outstanding “business rescue obligations” stemming from the company’s near 18-month bankruptcy proceedings, Takatso said in a separate statement.
The government’s voting rights, known as a golden share, will mean SAA can’t be sold on without its consent and the state will retain a stake of at least 33.3%, the DPE said.
It will also have full voting rights over “matters of national interest”.
Listen to Ryk van Niekerk’s (English) interview with Public Enterprises Minister Pravin Gordan (or read the transcript here):
With assistance from Paul Vecchiatto.
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